In 2000, the U.S.terms of trade was one.In 2009 the U.S.export price
Index was 1.15 and the U.S.import price index was 1.18.Which of the
Following statements is the best interpretation of the change in the U.S.
Terms of trade between 2000 and 2009?
A)In 2009, the United States had to export 2% more in order to obtain the same amount of imports as in 2000.
B)In 2009, the United States could export 2% less to obtain the same of amount of imports as in 2000.
C)Prices of U.S.exports rose more rapidly than prices of U.S.imports.
D)The U.S.terms of trade improved between 2000 and 2009.

Question

Quizplus · Accepted Answer

The terms of trade is calculated as the ratio of the export price index to the import price index. In 2009, the terms of trade would be 1.15/1.18, which is approximately 0.9746, indicating a decrease from 1 in 2000. This means the U.S. had to export more to obtain the same amount of imports, specifically about 2% more.